Technology news - Chipmakers' Choice Is Merger or Death
Results 1 to 1 of 1
  1. #1
    appus's Avatar
    Member InfoShowcaseActivity StatusThanks / Tagging Info
    join date|Join Date
    Jan 2011
    abode of appus is unknown to all
    post count|Posts
    reputation|Rep Power
    flag|Country: Users Flag!

    Technology news - Chipmakers' Choice Is Merger or Death

    August 30, 2011, 11:47 PM EDT By Ian King, Jun Yang and Naoko Fujimura

    Aug. 31 (Bloomberg) -- Memory-chipmakers ProMOS Technologies Inc., Powerchip Technology Corp. and Elpida Memory Inc., burdened by debt, losses and falling prices, are under increasing pressure to seek mergers or exit the industry.

    Taiwan’s ProMOS, with 16 consecutive quarterly losses, and Japan’s Elpida, beset by $4.61 billion in debt, produce chips that sell for less than they cost to make, said Mike Howard, an analyst at El Segundo, California-based IHS ISuppli. Powerchip hasn’t had a profit or sales gain in three quarters.

    Chipmakers struggle to match supply with demand in the $39 billion market for memory in personal computers, where plants take years to come online and can’t be shut down cheaply. The challenge is deepening as consumers shun PCs, cutting prices for dynamic random access memory, or DRAM, 26 percent in the past year. Some companies may not be able to go it alone, said Makoto Kikuchi, who runs Myojo Asset Management Japan Co.

    “Consolidation is inevitable for survival in this industry,” said Kikuchi, chief executive officer at Myojo in Tokyo. “It’s in a runaway deficit.”

    DRAM makers as a group have lost 19 percent of their market value this year, according to Bloomberg data. That compares with a 13 percent slide in the Philadelphia Semiconductor Index, which charts the performance of the broader chip industry. The Nasdaq Stock Market has slipped 2.9 percent this year.

    A smaller number of big chipmakers would be better equipped than multiple providers in gauging demand and adjusting output as buying fluctuates, Steve Appleton, CEO of Micron Technology Inc., said at a conference last week.

    ‘Very Challenged’

    Micron, based in Boise, Idaho, along with market leader Samsung Electronics Co. and Hynix Semiconductor Inc. are the only DRAM makers among the top eight generating a profit.

    Elpida, ProMOS, Powerchip, Nanya Technology Corp., by contrast, are less able to afford the billions of dollars in upfront costs for new plants and machinery. Without upgraded equipment, it costs more to produce the thumb-nailed-sized semiconductors.

    Powerchip and ProMOS, ranked by Gartner Inc. as the sixth- and seventh-largest DRAM makers, have already scaled back their reliance on the PC market. Still, they are the most vulnerable, said Mark Newman, an analyst at Sanford C. Bernstein & Co.

    “I find it difficult to believe they are going to survive this downturn,” said Newman, who’s based in Hong Kong. “They’re very, very challenged right now.”

    DRAM factories can cost more than $4 billion to construct and become obsolete within about five years. It’s so expensive to shut and restart the facilities that manufacturers keep them running 24 hours a day, regardless of market conditions.

    Boom, Bust

    The industry boosted output 87 percent in 2007 and 63 percent the following year, before the recession crimped demand for electronics and DRAM prices plunged, according to Micron research. Production rose a more modest 45 percent last year, and may gain 48 percent this year amid sluggish PC buying.

    Acquisitions have already reduced the number of memory chipmakers. Japan’s Elpida is the product of a 1999 merger between NEC Corp.’s and Hitachi Ltd.’s memory businesses.

    Micron, which tried and failed in 2002 to buy Hynix, has bulked up in memory in other ways. It bought a stake in Taiwan’s Inotera Memories Inc. in 2008, becoming joint-venture partner with Nanya. Micron expanded in DRAM in 1998 by buying the memory operations of Texas Instruments Inc., a pioneer in the field.

    Dealmaking doesn’t always improve a company’s prospects. Hynix acquired LG Semiconductor in a 1999 transaction that loaded it with debt and forced it to get a bailout.

    ‘Poor Men Together’

    “If traditional consolidation means that several companies combine into one, then it’s kind of difficult because everybody’s financial situation is quite severe,” said Eric Tang, a spokesman for Hsinchu, Taiwan-based Powerchip. “Two or three poor men together don’t make a rich man. You have to find your own way.”

    Samsung, which has 38 percent of the market, according to Stamford, Connecticut-based Gartner, has $9.15 billion in cash. Yet, the Suwon, South Korea-based electronics maker has focused on organic growth. It may shun purchases, betting it can build plants more efficiently by itself, said Young Park, a Hong Kong- based analyst at Woori Investment & Securities.

    While there is “another play or two to make” in the DRAM market, there are few opportunities left to buy assets cheaply that add significant scale to a company, Appleton said last week. Dan Francisco, a Micron spokesman, declined to elaborate.

    Hynix, based in Ichon, South Korea, has no plans to acquire other DRAM companies, said James Kim, Seoul-based spokesman for Hynix, the No. 2 DRAM maker.

    Getting Out of PCs

    “Regardless of consolidation in the industry, we will stay focused on reading future product trends to gain a technology leadership,” he said.

    James Chung, a Seoul-based spokesman for Samsung, declined to comment.

    To cope, some smaller chipmakers are diversifying away from DRAM and looking for other ways to decrease expenses.

    Powerchip aims to curtail production of chips used in personal computers and shift instead to other types of semiconductors, Tang said.

    Taiwan’s ProMOS is asking creditors to exchange debt for company stock and then intends to seek new investors to pump in cash, according to company spokesman Ben Tseng.

    Japan’s Elpida, which received $1.7 billion in loans from the government, its Taiwanese partner and banks to keep it afloat in 2009, is unlikely to revive a failed plan to acquire Taiwanese chipmakers, said Myojo Asset Management’s Kikuchi.

    Elpida’s Constraints

    The Japanese government’s interest in maintaining native supply of memory chips may mean Elpida isn’t allowed to sell itself to an overseas company. Instead, Toshiba Corp., which makes a type of memory used in mobile devices such as Apple Inc.’s iPad and iPhone, may be tempted to take it on, said Sanford C. Bernstein’s Newman.

    Hiroki Yamazaki, a spokesman for Toshiba, declined to comment, as did a representative of Elpida. Both companies are based in Tokyo.

    Nanya, which has reported a profit in one quarter since mid-2007, has no plans to buy rivals, said Pai Pei-lin, a spokesman for the Taoyuan, Taiwan-based company.

    “We are focusing on decreasing the cost and increasing prices,” Pai said.

    The number of DRAM providers may nevertheless need to drop to about three, IHS ISuppli’s Howard said.

    “It’s still going to be an industry in bad shape, even if it consolidates,” because production won’t be taken offline, said Howard. “If the industry gets down to three players, hopefully saner minds prevail.”

    Some businesses may be forced out of business, said Kim Chang Yeul, a Seoul-based analyst at Mirae Asset Securities Co. Germany’s Qimonda AG sought protection from creditors in 2009.

    “No one will want to buy these money-losing chipmakers now, and it’s a matter of who’ll get out of the market,” Kim said. “Who’d jump into this market?”

    --With assistance from Tim Culpan in Taipei. Editors: Tom Giles, Nick Turner.

    To contact the reporters on this story: Ian King in San Francisco at; Jun Yang in Seoul at; Naoko Fujimura in Tokyo at

    To contact the editor responsible for this story: Tom Giles at

    Powered By | Full Text RSS Feed | Amazon Plugin | Settlement Statement | WordPress Tutorials

    Hidden Content

    Hidden Content

  2. # 1a
    Technology news - Chipmakers' Choice Is Merger or Death

    Join Date
    Jan 2009
    Advertising world

Thread Information

Users Browsing this Thread

There are currently 1 users browsing this thread. (0 members and 1 guests)

Similar Threads

  1. Latest Tech News - Oracle's choice to nix Itanium support hurts HP sales
    By vis~as in forum Technology News, Updates & Reviews
    Replies: 0
    Last Post: 19th August 2011, 14:10
  2. Latest Tech News - Will Call frees you from the tyranny of choice
    By vis~as in forum Technology News, Updates & Reviews
    Replies: 0
    Last Post: 17th August 2011, 14:05
  3. Latest Tech News - Five possible responses to the Google-Motorola merger
    By vis~as in forum Technology News, Updates & Reviews
    Replies: 0
    Last Post: 17th August 2011, 03:44
  4. Replies: 0
    Last Post: 4th August 2011, 10:26
  5. Technology news - Ford Beefs Up Technology Team on Demand for Mobile Apps in Cars
    By appus in forum Technology News, Updates & Reviews
    Replies: 0
    Last Post: 22nd June 2011, 07:35

User Tag List

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts